European countries are some of the best places for pensions in the world, analysis shows, and AI is having an increasing impact on how each system works.
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The Netherlands is top of the class when it comes to comparing pension systems around the world, according to a recent global pensions report from the Mercer CFA Institute.
The ranking looked at more than 50 indicators and compared 47 retirement income systems, covering 64% of the world’s population.
The most relevant measurements were the level of private and public sector pension benefits available, the sustainability of the system to last decades into the future and the quality of its governance.
Iceland came second, being knocked off last year’s top spot, and Denmark came third in the 2023 index.
The majority of the European countries included in the report came out with a good grade. Only a few improvements are needed in Finland, Norway, Sweden, the UK, Switzerland, Ireland, Belgium, Portugal and Germany, according to the report.
On the other hand, France, Spain, Italy, Poland, Austria and Croatia, along with the US, have major risks and/or shortcomings that should be addressed, the report said.
Coming in at the bottom of the ranking are India, the Philippines and Argentina. Along with Turkey and Thailand, they share the worst ranking, grade D, suggesting that without any improvements, there are serious doubts about the efficacy and sustainability of these countries’ pension systems.
Risks in the system
The report acknowledges that ‘retirement income systems around the world are under pressure as never before’, due to the currently persistent inflation, the rising interest rates and the geopolitical uncertainty, which inevitably affects investment returns.
“The average age of populations around the world continues to rise in many markets, mainly more mature markets,” said Margaret Franklin, president and CEO at the CFA Institute.
“Inflation and rising interest rates have created a new market dynamic that poses significant challenges to pension plans. We also see continued fracturing as it relates to globalization,” she added. “These are just a few of the increasingly complex challenges that pension funds face that impact retirees in significant ways.”
The report quotes the OECD’s latest Pensions Outlook from 2022, which recommends that policymakers across the globe go through with the necessary reforms despite the current financial and economic uncertainty, to avoid putting the well-being of current and future pensioners at risk.
The report also recommends the strengthening of asset-backed pensions (as opposed to pay-as-you-go) which could contribute to the diversification of the sources to finance retirement, making pension systems more resilient.
The impact of artificial intelligence on pension systems
Artificial intelligence should improve pensions performance by cutting costs and highlighting upcoming risks, says the report.
Additional uses for AI could include building customised portfolios and identifying market anomalies, although AI was unlikely to be able to predict market movements with accuracy, so uncertainty will remain, the report said.
“The ongoing expansion of AI within the operations and decisions of investment managers could lead to more efficient and better-informed decision-making processes, which could potentially lead to higher real investment returns to pension plan members,” said David Knox, senior partner at Mercer, according to a Reuters article.
The annual survey also pointed to risks of AI models generating fake information when used in a new context, and of cyber-attacks against pension members’data.
FAQs
The Netherlands is top of the class when it comes to comparing pension systems around the world, according to a recent global pensions report from the Mercer CFA Institute. The ranking looked at more than 50 indicators and compared 47 retirement income systems, covering 64% of the world's population.
Are pensions better in the US or Europe? ›
U.S. consultancy Mercer issues a closely-watched annual report that analyzes 47 different retirement income systems around the world — with European nations often coming out on top. In fact, three countries have dominated the Mercer CFA Institute's global index since 2021.
Which country gives highest pension? ›
The 15th annual Mercer CFA Institute Global Pension Index (MCGPI) has been published, and it shows that the Netherlands' retirement income system has once again secured the first position. Iceland and Denmark have claimed the second and third positions in the ranking, respectively.
What is the best European country for Americans to retire to? ›
According to the annual report, the Netherlands (with a score of 85.0), Iceland (84.8), and Denmark (81.3) are the countries with the top three pension systems out of the 47 countries that it studied.
Which countries have the best old-age pension? ›
Following Finland, the best countries for pensions are Poland and Sweden. Both boast an average retirement age of 65, below the average of 66, and Sweden has an impressive 100% rate of participation in funded pensions.
What is the cheapest and safest country to retire in? ›
7 of the most-affordable places to retire abroad
- Malaysia.
- Mexico.
- Panama.
- Philippines.
- Portugal.
- Thailand.
- Vietnam.
The variation across countries is large, with the tax and contribution rate for an average earner ranging from zero in Bulgaria, Ireland, Lithuania, Malta, the Slovak Republic, and Slovenia to over 30 percent in Denmark and the Netherlands.
What is the Dutch state pension? ›
The basic pension benefit for a single person equalled EUR 1 334.94 per month in 2022. For couples, the amount per person is EUR 914.15 for a total amount of EUR 1 828.30 per couple. There is an additional holiday allowance of EUR 69.30 per single person and 49.51 per person for couples.
What is the highest pension in USA? ›
The maximum Social Security benefit at full retirement age is $3,822 per month in 2024. It's $4,873 per month in 2024 if retiring at age 70 and $2,710 if retiring at age 62.
Which employer gives the best pension? ›
Britain's best pensions revealed
| Organisation | Employer Pension Contribution | Gross value of £1 contribution from a worker earning £60,000 |
|---|
| Civil Service | 26-30pc | £8.46 |
| NHS | 20.68pc | TK |
| TotalEnergies Gas & Power | up to 20pc | N/A |
| Teachers | 16.5pc | £4.36 |
6 more rowsAug 11, 2023
Based on selection criteria including cost of living, environmental factors, medical care, expat community, taxes & ease of acclimatizing in a foreign country, the top 5 best countries to retire in Europe include Portugal, France, Slovenia, Italy, and Montenegro.
What is the easiest European country to live in as an American? ›
It's no wonder Expat Insider ranked the country as the 5th best destination for expats in their 2021 study. In this guide, we will share with you the amazing reasons Portugal is the easiest European country to move to for every American.
What is the safest country to retire in Europe? ›
The best European countries for retirement
| Country | Rank | Crime Index |
|---|
| Finland | 1 | 27.01 |
| Spain | 2 | 33.13 |
| Slovenia | 3 | 21.79 |
| Netherlands | 4 | 27.22 |
34 more rowsIn 2022 the maximum benefit was EUR 1 222.51 per month. The payment is subject to a reduction of 5.84% for social contributions and the maximum net benefit is EUR 1151.12 per month. Benefits are subject to income tax.
How much is the US pension? ›
The maximum benefit depends on the age you retire. For example, if you retire at full retirement age in 2024, your maximum benefit would be $3,822. However, if you retire at age 62 in 2024, your maximum benefit would be $2,710. If you retire at age 70 in 2024, your maximum benefit would be $4,873.
What is the average pension in France? ›
Gross monthly amount per pensioner of direct pensions in France 2004-2020. In 2020, a retiree in France would receive a monthly gross pension of 1,466 euros worth of pension. Since the mid-2000s, this average gross amount of pensions per retiree of direct pensions, excluding the child surcharge, has increased.
Is Europe good for retirement? ›
The tax system, healthcare, living costs, and high quality of life are just a few reasons why retirees consider moving to Europe to spend their retirement years. To learn more about how you can retire in Europe, read the article below.
Are pensions common in Europe? ›
In 2017, old-age pensions accounted for 75 % of all pension benefits in the EU-27, while survivors' pensions accounted for 13 % and disability pensions for 6 %. The ratio of old-age benefits relative to GDP rose in the EU-27 from 9.7 % in 2008 to 11.0 % in 2013 and 2014, before decreasing slightly to 10.8 % in 2017.
Do people in Europe save for retirement? ›
Pension Systems: Most European countries have a comprehensive pension system that forms a significant part of retirement income. These systems, whether public or private, contribute to the overall retirement savings of individuals.
What is the best country to retire in from the US? ›
Plus, it is helpful to note that the top 10 most popular countries among U.S. expats in order of most to least popular are: Mexico, Canada, the U.K., Germany, Australia, Israel, South Korea, France, Japan, and Spain. 2 Many of these countries offer below-average costs of living.
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